A commentary on insurance coverage issues in Hawaii and beyond

March 03, 2014

No Excess Indemnity Coverage When When Arcdiosese Has No Liability

The Eighth Circuit determined the Archdiocese of St. Louis had no indemnity coverage after settling a suit in which it had no liability. Chicago Ins. Co. v. Archdiocese of St. Louis, 2014 U.S. App. LEXIS 1769 8th Cir. Jan. 29, 2014).

The Archdiocese was sued when the son of the underlying plaintiff committed suicide after allegedly being sexually molested. After a motion to dismiss, two claims for intentional conduct remained against the Archdiocese and an allegation that the Archdiocese"inappropriately, recklessly, and/or intentionally placed [the boy] in a knowingly dangerous environment."

The parties settled. The Archdiocese then turned to its insurers for indemnification. The Archdoicese held an excess policy issued by Chicago Insurance Company. The policy promised to indemnify for loss, defined as "the sums paid as damages in settlement of a claim or in satisfaction in a judgment for which the insured is legally liable."

CIC denied the claim for coverage and filed suit for a declaratory judgment. The district court agreed that the Archdioscese could not be held legally liable under Missouri precedent. If the insured could not be held legally liable, the Archdiocese failed to establish that a defined "loss" occurred.

On appeal, the Archdiocese argued it was potentially liable, which triggered indemnification if its settlement. The Eighth Circuit agreed with the district court. Under Missouri law, whether an entity was negligent depended on whether a reasonably prudent person would have anticipated danger and provided against it. In order to determine how a "reasonably prudent Diocese" would act, a court would have to excessively entangle itself in religious doctrine and policy. Therefore, the Archdiocese could not show the settlement was in reasonable anticipation of liability.

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No Excess Indemnity Coverage When When Arcdiosese Has No Liability

The Eighth Circuit determined the Archdiocese of St. Louis had no indemnity coverage after settling a suit in which it had no liability. Chicago Ins. Co. v. Archdiocese of St. Louis, 2014 U.S. App. LEXIS 1769 8th Cir. Jan. 29, 2014).

The Archdiocese was sued when the son of the underlying plaintiff committed suicide after allegedly being sexually molested. After a motion to dismiss, two claims for intentional conduct remained against the Archdiocese and an allegation that the Archdiocese"inappropriately, recklessly, and/or intentionally placed [the boy] in a knowingly dangerous environment."

The parties settled. The Archdiocese then turned to its insurers for indemnification. The Archdoicese held an excess policy issued by Chicago Insurance Company. The policy promised to indemnify for loss, defined as "the sums paid as damages in settlement of a claim or in satisfaction in a judgment for which the insured is legally liable."

CIC denied the claim for coverage and filed suit for a declaratory judgment. The district court agreed that the Archdioscese could not be held legally liable under Missouri precedent. If the insured could not be held legally liable, the Archdiocese failed to establish that a defined "loss" occurred.

On appeal, the Archdiocese argued it was potentially liable, which triggered indemnification if its settlement. The Eighth Circuit agreed with the district court. Under Missouri law, whether an entity was negligent depended on whether a reasonably prudent person would have anticipated danger and provided against it. In order to determine how a "reasonably prudent Diocese" would act, a court would have to excessively entangle itself in religious doctrine and policy. Therefore, the Archdiocese could not show the settlement was in reasonable anticipation of liability.